U.S. v. Universal Health Servs. Inc. – March 2015 (Summary)

FALSE CLAIMS ACT

U.S. v. Universal Health Servs. Inc., No. 14-1423 (1st Cir. Mar. 17, 2015)

The United States Court of Appeals for the First Circuit overturned a lower court’s dismissal of a False Claims Act (“FCA”) claim, holding that the relators adequately stated that a clinic fraudulently misrepresented its compliance with state regulations when it submitted claims for payment.

Relators’ daughter was sent to defendant, a mental health clinic, for therapy after experiencing behavioral problems at school. The daughter began therapy sessions with a counselor, who held no professional license. The daughter was transferred to a different counselor after the relators complained of her care. The second counselor was also unlicensed. Next, the daughter was transferred within the clinic to a therapist, who held herself out as a Ph.D. In actuality, the therapist trained at an unaccredited online school and had her application for a professional license rejected. Nonetheless, the therapist diagnosed the daughter with bipolar disorder.

After several months, the daughter’s school informed the relators that the daughter must see a psychiatrist if they wished for her to continue enrollment. The “therapist” referred the relators to a “psychiatrist” within the clinic. The “psychiatrist” prescribed the daughter medication for her bipolar disorder, which caused a fatal adverse reaction. Relators later found out the “psychiatrist” was actually only a nurse and not under the supervision of any clinic staff psychiatrists. Moreover, the only psychiatrist the clinic had on staff was not even board-certified.

Relators brought suit, claiming that the clinic violated the FCA when it received payments from the state despite the fact that it was in violation of 14 separate regulations promulgated by the state department of health. The lower court dismissed relators’ suit, holding that the regulations relators rely on were conditions of participation, not conditions of payment.

The court overruled the lower court, holding that the court’s distinction was incorrect because relators’ claims dealt with conditions of payment. One of these conditions for payment, under the state department of health regulations, is to ensure appropriate supervision. Here, relators alleged that counselors, the therapist, and the psychiatrist did not receive proper supervision from the clinic. Additionally, relators alleged that the clinic failed to maintain a properly licensed psychiatrist on staff, which is a material condition to receive payment under the state department of health regulations.